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Glossary of Estate Planning Terms

Alternate Valuation Date: A date exactly six months following the decedent’s date of death that the personal representative may choose to revalue for estate tax purposes, all assets held by the estate.

Annul Exclusion: The amount of $11,000 that can be given to any individual or any number of individuals gift tax-free. A husband and wife together can give $22,000 to each person.

Assets: All types of property, which can be mad available for the payment of debts.

Beneficiary: A person (or institution) who derives benefit from the creation of a trust, proceeds of insurance policy, or property designated by a will.

Codicil: A supplement, amendment, or addition to a will executed with all the formalities of the will itself. It may explain, modify, add to, subtract from, qualify, alter, or revoke provisions in a will.

Common Disaster Clause: A statement in a will telling how property is to be distributed if would-be devisees die from the same accident.

Conservator: A person who is appointed by a court to manage the estate of a protected person who, because of age, intellect, or health, is incapable of managing his or her own affairs.

Death Taxes: Taxes due by reason of death of an individual.

Decedent: A deceased person.

Deed: A legal instrument used to transfer title to real property in the eyes of the law.

Devise: A gift made by a will or a trust. A devise is made to a beneficiary under the terms of the trust.

Devisee: Any person designated in a will to receive real or personal property.

Domicile: A person’s permanent legal residence.

Durable Power of Attorney: Allows the power of attorney to survive any disability the principal could suffer.

Estate: The total of all assets, all debts and other obligations of an individual.

Executor: A person or institution named in a will and appointed to carry out the will’s instructions and to manage the probate estate.

Execution: The act of properly signing legal documents such as a Power of Attorney or Will. Proper execution of a will is more than just “signing” and normally requires two witnesses who are not beneficiaries under the will. For a power of attorney or a trust execution involves having a notary public certify your signature.

Federal Estate Taxes: Taxes imposed by the US Government on the value of a person’s estate upon his or her death.

Fiduciary: Includes personal representative, guardian, conservator and trustee. A person in whom one places great confidence in and upon whom one relies for his or her integrity, trust, and good faith. A fiduciary has the legal duty to act in the best interest and benefit of another and therefore is held to the very highest legal standards.

Gross Estate: The value of an estate before the debts are paid.

Guardian: A person legally empowered and charged with the duty of taking care of another who, because of age, intellect, or health is incapable of managing his or her own affairs.

Guardianship: A court controlled program to manage the affairs of minor children or incapacitated adults.

Health Care Agent: A person designated to make health care decisions for an individual.

Holographic Will: A handwritten will in which the signature and material provisions are in the handwriting of the testator, and which needs not be witnessed.

Inheritance Tax: A tax imposed by the state at the time of a person’s death that is based upon the total value of the decedent’s estate. Arizona does not have an inheritance tax.

Inherit: To receive property from a deceased person.

Intestate: A term used when a person dies without leaving a valid will.

Irrevocable: Something that cannot be altered, changed or modified. An irrevocable trust is one that cannot be changed, canceled or revoked once it is established.

Joint Tenancy: A form of co-ownership in which two or more persons hold interests in the same property with right of survivorship.

Living Trust: A written document established during a person’s lifetime into which he/she places property (sometimes called an Inter-Vivos Trust.) The living trust contains instructions for management and distribution of the trust property during his/her lifetime as well as upon his/her death or disability. A living trust is typically revocable, enabling the person to change it at any time, so long as the person remains legally competent to enter into contracts.

Living Will: A document that defines the circumstances under which health care professionals should withhold or remove artificial life support, or refrain from using heroic measures, if the person is unable to give informed consent due to incapacity.

Marital deduction (gift): Allows married persons to make unlimited lifetime gifts to each other and claim a marital deduction for any amount without a gift tax.

Marital Deduction (Estate): Allows married persons to make unlimited bequests to each other without an estate tax.

Net Value: The value of an estate after all debts have been paid. Federal estate taxes are based on the net value of an estate.

Payable on Death (POD): Designation is the naming of a beneficiary to receive an account balance on a party’s death without a probate.

Per Capita: Equal shares to all who inherit.

Personal Representative: A person named in a will or appointed by the district court to administer the estate of a decedent. See also Administrator or Executor.

Personal Property: All tangible property that is not real estate.

Per Stripes: A method of dividing an estate among one’s surviving descendents. Each survivor receives only the amount that his/her immediate ancestor would have received if that ancestor had been alive at the time of grantor’s death

Pour Over Will: A short will often used with a living trust that states that any property left out of the living trust will become part of (or “pour over” into) the trust upon death.

Power of Attorney: A legal document that gives another person, the attorney-in-fact, legal authority to act on the principal’s behalf. This authority ends at the death of either the principal or the attorney-in-fact.

Principal: A person who is the original source of authority, often used when the owner of property authorizes another person, through a power of attorney, to act in his/her stead.

Probate: The process through which the legal title to property is transferred from a decedent to the beneficiaries. If a person dies with a will (testate), the probate court determines if the will is valid, hears any objections to the will, orders that creditors be paid and supervises the process to assure that property is distributed by the Personal Representative or Executor according to the terms of the will. If a person dies without a will (intestate) the probate court appoints and Administrator who receives all claims, pays creditors, and then distributes all property according to the laws of the state.

Revocable: Subject to alteration, change or modification.

Revocable Trust: A trust in which the person who created the trust retains the power to change, cancel, or revoke the trust during his/her lifetime.

Separate Property: Property acquired by either husband or wife before a marriage or after the termination of a marriage.

Sole Ownership: Title to property in one name.

Spouse: A person’s husband or wife.

Stepped-up-Basis: The revaluation (for tax purposes) of property upon a person’s death, which will reduce or eliminate capital gain tax upon the subsequent sale of the asset.

Testamentary Trust: A trust set up in a will that takes effect after death usually used for minor children.

Testate: A person who dies with a valid will.

Trust: The legal relationship created by virtue of one party holding legal title to property, whether real or personal, for the benefit of another.

Trustee: A person or institution responsible for the management and distribution of property held in a Trust.

Trustor: Maker of a trust

Unified Credit: The amount of tax credit, similar in nature to the personal income tax exemption, applied to the estate tax due at a person’s death, which is currently 1.5 million.

Will: The legal document that provides instructions for disposition and distribution of a person’s property upon the person’s death.

Witness: A person who observes the signing of a will and attests to the signature.